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I'm helping my team to project 90-day T-bill forward rates. I have two options: using FWCM or FWCV in Bloomberg. My team has used FWCM. Today I opened FWCV and found that the rates for the same curve (US Treasury Actives Curve) are not the same.

FWCM: FWCM

FWCV: FWCV

I contacted Bloomberg Help Desk. They told me that FWCM is based on market rates while FWCV is based on projections. I'm still not sure which is more accurate or appropriate to use. Could someone please shed some lights?

LeonC
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1 Answers1

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It will depend on what you need.

The calculation method itself is based on the same formula in any case. However, from the top of my head, FWCM always uses piecewise linear (Simple-comp zero rate) interpolation method. There are also some small timing differences because FWCM (and the BLC tickers of FWCM) uses hard coded update times for example (I think the update frequency is every 5 minutes).

Since you are looking at US treasuries, you need to make sure you are using the treasury conventions. If I remember correctly there is (at least used to be) a document showing the exact differences and how to reconcile the results between them. You can ask the help desk for this again if they did not provide it.

Within the horizon tab, you can switch between Swap Rate and Zero Rate. If you click on the cogwheel in FWCV, you also have a bunch of settings and if you hover your mouse over the column headers you can see day-count and compounding conventions. enter image description here

Only the Swap Rate setting uses the standard Actual/Actual EOMC Semi- Annually for treasuries and if you toggle to Zero Rate, you will get ACT/360 EOMC Continuously Compounded.

The choice between FWCV and FWCM pins down to the following considerations:

  • If you need the latest data (up to data whenever you load the function) and more flexibility in terms of tenors, you can load FWCV and set all tenors (via Customize at the bottom right) and Forwards you are interested in.
  • If you like historical views (load tickers in HP) and a nice overview (complete matrix), you can use FWCM. Either way, it is the same data and calculation, just in a different representation.

Provided you look at Swap Rates, FWCM and FWCV Horizon curve will be identical. You can best check that with historical data because the update frequency does not matter anymore. The ticker on the right hand side below comes directly from FWCM (loaded in HP).

enter image description here

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The major difference for swaps is that FWCV uses your curve settings, which may (almost certainly) be different from BLC's. The setting BLC uses for this curve are the source 8 default bloomberg curve with interpolation method 1(PWL).

enter image description here

AKdemy
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  • Thank you for your reply. I re-read your response a few times. Here is what I don't understand:
    1. FWCV uses my curve settings, which is different from BLC tickers (what are BLC tickers?)
    2. FWCV horizon tab is based on the conventions of the individual curve objects. Therefore, if I choose "US Treasury Actives Curve" it should use the actual/actual convention. Am I correct? Is this a better option than FWCM that uses the BLC tickers?
    3. I see in your FWCV screen you're using the US Dollar Swaps (30/360) Curve. However, since I'm looking at US treasuries, is this curve relevant?
     – LeonC Dec 13 '22 at 15:59
  • I am a bit busy atm but will respond in more detail later. BLC is the "pricing" source (computed) of the ticker you see in the FWCM screen when you hover over a value. – AKdemy Dec 14 '22 at 02:29